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Compliance

Introductions

GST stands for Goods and Services Tax which came into effect on 1st July 2017. This is indirect taxation, which an end consumer usually pays. GST replaced many other indirect taxes such as excise duty, VAT, service tax, entry tax and luxury tax. In brief, this tax is levied on the supply of goods and services. It is calculated on the value added to any goods. Goods and Services Tax in India is a comprehensive, destination-based and multi-stage tax added on every value addition.

Let's take a complete look into what these various terms mean, there by understanding what GST is all about.

  • Comprehensive - GST covers every aspect of sale and purchase. It replaced various other taxes. It is called comprehensive because it encompasses every aspect of commercial life.
  • Destination-based - GST is levied in a state where the product is sold rather than the state where it was manufactured. For example, if these goods were produced in West Bengal and sold in Andhra Pradesh, the GST will be levied and collected in Andhra Pradesh.
  • Multi-stage - In the production of any goods or services, there are usually plenty of stages. These stages include the procurement of raw materials, production or manufacture, warehousing, selling to wholesalers, retailers and finally, the end consumers. At every stage, GST is levied. This makes it a multi-valued tax.
  • Value addition - Let's take an example of textile production. First, raw materials such as cotton or silk are taken and made into cloth. This increases the value of the raw materials. Then the fabric is designed into clothes which further enhances their value. After the dresses are made, they are branded and sold to retailers who advertise and market them, thereby increasing their value. GST is levied on each of these stages where value is added to the product.
    • What are the types of GST in India?

    There is a four-fold break-up of goods and services tax in India. It oversees the levy of tax for central government GST, GST for states, union territories, and the integrated goods and services tax. You can check out the details of these below.

  • State Goods and Services Tax - SGST or State Goods and Services Tax is calculated for intrastate goods and services transactions. The State Government keeps all of this tax that is levied. This tax replaces the other previous taxes such as VAT, octroi, luxury, entertainment and purchase tax.
  • Integrated Goods and Services Tax - Integrated Goods and Services Tax is the tax that is levied on service transactions and inter-state goods. It applies to exports and imports too. Both the state and the center take their respective shares of the tax. SGST part of the tax goes to that state where the goods or services are consumed.
  • Union Territory Goods and Services Tax - Union Territory Goods and Services Tax is the same as State Goods and Services Tax except that it is levied in the Union Territories of the country rather than the states. So expect to pay this tax in Pondicherry, Daman and Diu, etc.

    • FAQ’s

    Q . Which are the cases in which registration is compulsory?

    Ans. As per Section 24 of the CGST/SGST Act, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

    (i) persons making any inter-State taxable supply;

    ii) casual taxable persons;

    iii) persons who are required to pay tax under reverse charge;

    iv) electronic commerce operators required to pay tax under sub-section (5) of section 9;

    v) non-resident taxable persons;

    vi) persons who are required to deduct tax under section 51;

    vii) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise;

    viii) Input service distributor (whether or not separately registered under the Act)

    ix) persons who are required to collect tax under section 52;

    x) every electronic commerce operator

    xi) every person supplying online information and data base retrieval services from a place outside India to a person in India, other than a registered person; and,.

    xii) such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

    Ans. A person should take a Registration, within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as is prescribed under the Registration Rules. A Casual Taxable person and a non-resident taxable person should however apply for registration at least 5 days prior to commencement of business.

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